Shafted by NAFTA

by Gregory N. Heires

tppThe scorecard is in 20 years after the passage of the North American Free Trade Agreement: Corporations won and workers lost.

“NAFTA has done what it was intended to do, which is to lower wages,” Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, D.C., said in an interview.

The free trade pact led to hundreds of thousands of lost jobs, displaced millions of farmers in Mexico, turned the U.S. trade surplus with Mexico into a deficit and gave multinational corporations new powers over governments, he said.

NAFTA at 20,” a report by Public Citizen, offers a blistering assessment of the trade pact between the United States, Canada and Mexico. NAFTA’s record is a warning as the United States considers similar trade agreements with Asian and Latin American countries.

Adios Jobs

In arguing for the pact’s passage, former President Bill Clinton said NAFTA would create a million jobs within five years. That didn’t happen.

In fact, the United States has lost as many as 1 million jobs because of NAFTA, according to Public Citizen. The federal Trade Adjustment Assistance program has certified more than 845,000 U.S. workers to be eligible for retraining because they lost their jobs due to imports from Canada and Mexico or the relocation of their jobs to those countries.

Clinton also said that NAFTA would lead to an “export boom” to Mexico. Some boom: The U.S. trade deficit with Canada of $29.1 billion and the $2.5 billion surplus with Mexico in 1993, the year before NAFTA took effect, became a combined trade deficit of $181 billion by 2012, Public Citizen’s report notes.

Broken Promises

“After two decades of NAFTA, the evidence is clear: the vaunted deal failed at its promises of job creation and better living standards while contributing to mass job losses, soaring income inequality, agricultural instability, corporate attacks on domestic health and environmental safeguards, and mass displacement and volatility in Mexico,” the report concludes.

Public Citizen makes these key points:

• Real wages in Mexico have plummeted below pre-NAFTA levels as prices for consumer goods have exceeded wages increases. Today’s minimum wage is only 38 percent of its value when the pact went into effect.

• Under NAFTA, the export of subsidized corn from the United States increased, destroying the livelihood of 1 million small farmers in Mexico. The jobs of another 1.4 million workers dependent on agriculture were also destroyed.

• Corporate promises of job creation were broken. Caterpillar, Siemens and Johnson and Johnson lobbied for NAFTA, suggesting that it would provide incentive for hiring and reduce the need to move jobs to Canada and Mexico. Caterpillar laid off 338 workers at its Mapleton, Ill., plant in 2008 as it shifted production to Mexico. Siemens eliminated more than 1,500 U.S. jobs while shifting production to Mexico. Johnson and Johnson promised it would hire hundred but then off-shored 800 jobs to Canada and Mexico.

Weisbrot noted that NAFTA to a certain extent is a misnomer as many free-trade policies were adopted before the agreement. Less known are the provisions in NAFTA that significantly increased the legal clout of corporations over governments.

The trade agreement established independent tribunals that allow multinational corporations to sue governments if regulations impede their profit. Investors have obtained $360 million in compensation by challenging toxic chemical bans, land-use rules, and water and forestry policies, according to Public Citizen. Some $1.4 billion of such claims are outstanding.

For the typical Mexican worker, it appears difficult to see any benefit from NAFTA.

Poverty declined in Latin America from 48.4 percent in 1990 to 27.9 percent in 2013, according to the Economic Commission for Latin America. Poverty in Mexico was 52.4 percent in 1994, dropped to 42.7 percent in 2006, but then rose to 51.3 percent in 2012, as noted by Associated Press.

“While it changed the country in some fundamentals, the treaty never met many of its sweeping promises to close Mexico’s wage gap with the United States, boost job growth, fight poverty and protect the environment,” AP’s Mark Stevenson wrote in a December story, “At 20 years, NAFTA didn’t close Mexico’s wage gap, published in the Miami Herald. “Mexico’s weak unions and competition from Asia and Central America kept wages down; the tightening of security along the U.S. border closed off Mexico’s immigration ‘escape valve,’ and environmental provisions in the agreement proved less powerful than those protecting investors.”

Sadly, NAFTA is emblematic of the evolution of the U.S. economy in recent decades and the entrenchment of anti-labor neo-liberal policies. Workers continue to get shafted as inequality grows, jobs are exported, unions face relentless attacks and economic regulations are weakened. How much the trade agreement is to blame for these trends is difficult to pinpoint. But without a doubt, it has been a contributing factor.

NAFTA is another lesson that we need fair trade, not free trade.



Gregory N. Heires is senior associate editor at Public Employee Press, the official publication of District Council 37, which represents 120,000 municipal workers and 50,000 retirees in New York City.  He blogs at The New Crossroads, where this post originally appeared..

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2 Responses

  1. […] “NAFTA at 20,” a report by Public Citizen, offers a blistering assessment of the trade pact between the United States, Canada and Mexico. NAFTA’s record is a warning as the United States considers similar trade agreements with Asian and Latin American countries. Read the source story here. […]

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